How to escape the commodity trap?

How to escape commoditization?

How to sharpen and consolidate your differentiation?

Differentiation is one of the most sought after generic strategy. It consists in delivering greater value, that customers are willing to purchase at a premium price. Well conducted differentiation strategies translate into superior financial performance, as iconic companies like Coca-Cola or Apple exemplify.

When we think of differentiation, we tend to think of product or service differentiation, whereas a company can differentiate itself at every point of contact with its clients. Analyzing your client experience will provide you with insightful points of differentiation. Below is a non-limitative list of opportunities to differentiate during the entire client’s experience. Can you make this whole process more fun, more convenient, more satisfying, less irritating, less worrisome?

  • Clients become aware of their need for your product or service
  • Clients find your offering
  • Clients make the final purchasing decision
  • Clients order, purchase and pay
  • Your product or service is delivered
  • Your product is stored. It is installed. It is transported.
  • Your service is consumed.
  • What your clients are really using your product or service for?
  • Clients need help.
  • Your products is repaired or serviced
  • Clients need to return or exchange
  • Clients do no longer use your product. Clients need to dispose of it.

For differentiation strategy to be well executed, it has to be well-defined and easily understood by every employee, especially frontline agents. What are the sources of differentiation? Do customers agree? Research shows that

  • most management teams spend little time discussing or measuring the sources of differentiation of their company and don’t agree on what they are;
  • 80% of managers think their companies are strongly differentiated, when fewer than 10% of customers feel the same (Zook &Allen, 2011).

Differentiation has to rest on a few core resources and processes that reinforce one another (see our post on business model).

There are two reasons why differentiation tends to fade with time : it is imitated or undermined by competition ; growth breeds bureaucracy, complexity and complacency. Companies drift away from their founder’s beliefs and core capabilities (see the representative case of Starbucks).